(Adds economist comment, A$ reaction)
Australia's central bank will maintain its "highly accommodative settings" as long as required and will continue to consider how further policy measures could support the country's flagging economy, minutes of its September meeting showed on Tuesday.
The highly anticipated minutes did not indicate any policy action was imminent, wrong-footing Aussie dollar bears who are betting on another cut to the Reserve Bank of Australia's (RBA) cash rate to 0.1%.
Markets were closely watching the minutes for any discussion around further stimulus but the RBA "added little to our understanding of how monetary policy might evolve," ANZ economist David Plank wrote in a note.
As a result, the Australian dollar reversed its losses and jumped 0.5% to above 73 U.S. cents. AUD=D3
At its Sept. 1 policy meeting, the Reserve Bank of Australia (RBA) held its cash rate at a record low of 0.25% in a widely expected decision, having slashed rates in an emergency meeting in March to blunt the economic shock from the coronavirus pandemic.
Odds have since narrowed for a further cut with interest rate futures
0#YIB: still almost fully pricing in a 15 basis point reduction to 0.1% at the RBA's Oct. 6 policy meeting.Board members noted there was plenty of scope for further fiscal stimulus with debt levels for the Australian federal and state governments still low relative to the size of the economy, the minutes showed.
"In our view the timing and extent of further monetary policy measures will depend critically on fiscal policy," ANZ's Plank said.
"We think the upcoming federal and state budgets will contain enough stimulus to reasonably expect a relatively strong recovery in 2021," he added. The federal budget is due on Oct. 6.
"If this is the case, then we think the RBA will hold off from taking further steps until some time into 2021."
